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Dollar cheers Dow's rally with gains

NEW YORK: The dollar ended higher against the euro and yen on Friday as dealers cheered Wall Street's recovery after a week of losses.

The Dow Jones industrial average rose for the second straight day, climbing 2.4 percent to end at a record 11,522.6 points. The tech-heavy Nasdaq composite, which has slumped heavily this week, bounced back Friday to close up 4.17 percent, or 155.49 points, at 3882.62.

Surging stocks helped snap the dollar's losing streak against the euro and allowed it to extend its winning ways against the yen. At the close the dollar was up over a quarter of a percent against the euro to trade near 1.0289 dollars per euro, trimming some of the week's sharp losses.

Stronger economic data released in Europe on Monday and a sudden downturn in U.S. technology stocks had sparked the euro's rally, which helped the one-year-old currency rise more than 3-1/2 cents during the week.

Meanwhile, the dollar rose 0.4 percent against the yen to trade near 105.35, unable to hold at the near seven-week highs it had hit in earlier trading on Friday.

The yen has fallen sharply since the start of the year, partly because traders worried the Bank of Japan may again step into the currency market to weaken the yen and prevent it from choking off Japan's fragile economic recovery.

At the end of a week of sharp moves and active trading, many dealers admitted to being confused by the movements and preferred to book some profits before the weekend.

"It is a bit confusing in the market, we have seen some rotation in the stock market and that seems to be affecting the dollar," said Royal Bank of Canada chief trader Rick Barnett.

At the start of trading, dealers digested fresh strong U.S. economic data when the Labour Department said 315,000 new jobs had been created in the nonfarm sector.

For economists, this merely confirmed that America's robust economy is still growing rapidly and the Federal Reserve will need to push up interest rates by a quarter of a percentage point in early February to prevent overheating.

Wall Street had looked for a gain of 224,000 new jobs. In November 222,000 new jobs were created.

The report also showed a 0.4 percent rise in hourly earnings, topping expectations of a 0.3-percent rise.

The data helped the dollar zig-zag against the euro before dealers began to shift back into U.S. assets.

"It was not as inflationary as the market may have been fearing. ... Therefore, the asset markets are recovering, and that's what a lot of forex is keying off of at the moment," said Seth Garrett, global head of spot currency trading at Credit Suisse First Boston.

Meanwhile, the yen is expected to falter further, amid fears the Bank of Japan (BoJ) may intervene again. Japan Finance Minister Kiichi Miyazawa reconfirmed his nation's commitment to stemming the yen's appreciation during Asian trading hours, saying Japan would need to intervene if any rapid movements were detected.

"Our technical outlook is for a move back toward the 115 area over the coming months," Mark Roberts, technical analyst at IDEAglobal.com.

The BoJ intervened last Tuesday to prop the dollar as the U.S. currency was probing four-year lows near 101 yen. It has intervened some 14 times since June, fearing the yen's sharp rise will hinder Japan's nascent recovery.

The market was also keenly focused on a weekend meeting of Group of Seven major industrialised nations, which lays the groundwork for a meeting of G7 finance ministers later this month.-Reuters